Huntington Ingalls (HII) Looks A Solid Bet: Should You Buy?

Huntington Ingalls Industries, Inc. HII is currently benefiting from stable financials and also providing regular cash returns to shareholders. Evidently, during the first nine months of 2017, the company paid $82 million worth of dividend, up from $70 million a year ago. In November 2017, the company announced a quarterly dividend hike of 20% to 72 cents per share.

Going forward, based on its strong cash generating capabilities, the company continues to expect to return 100% of free cash flow to shareholders through dividend hikes of at least 10% annually.

Being the sole designer and manufacturer of nuclear powered aircraft carriers in the United States, over 70% of the active U.S. Navy fleet consists of Huntington Ingalls ships. This has helped the company to expand its service portfolio.

Additionally, the solid fiscal 2018 budget proposal, along with the additional appropriations bill put forward by President Trump, has boosted the growth prospects of the company. Moreover, Huntington Ingalls continues to urge both the Executive Branch and the Congress to support investment in defense sector in 2018 and beyond, which will efficiently leverage its profitable production lines.

Going forward, Huntington Ingalls projects to invest approximately $1.5 billion by 2020 to strengthen its core shipbuilding business. This is expected to boost the company’s earnings numbers going forward. Notably, the company delivered positive earnings surprise in two of the trailing four quarters, with an average beat of 14.22%.

Moreover, its current year Zacks Consensus Estimate for earnings has improved 4.2% in past 60 days. Impressively, the company boasts a long-term earnings growth rate of 15% compared favorably to the industry’s rate of 11.7%.

However, the company faces steep competition from another shipbuilding giant General Dynamics Corp. GD, in its primary business of designing, building, overhauling, and repairing military ships.  

Price Movement

Shares of Huntington Ingallshave outperformed the industry in the last three months. The stock has advanced 11.5% compared with the industry’s growth of 11.2%.

This can be attributed to the company’s solid cash generating capabilities along with recent developments witnessed in the shipbuilding business.

Zacks Rank

Huntington Ingalls carries a Zacks Rank #2 (Buy). Investors can consider other top-ranked stocks from the broader sector like Curtiss-Wright Corporation CW and Teledyne Technologies Incorporated TDY that sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Curtiss-Wright surpassed the Zacks Consensus Estimate in the past four quarters, with an average positive earnings surprise of 11.78%. The company has a solid long-term earnings growth rate of 12.4%.

Teledyne Technologies surpassed the Zacks Consensus Estimate in the past four quarters, with an average positive earnings surprise of 37.17%. The company flaunts a solid long-term earnings growth rate of 7.5%.

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